A Crisis is a Terrible Thing to Waste

August 11, 2009

By Chip Grizzard

(Aug. 11, 2009) There's nothing like being in a mess to get an organization focused on fixing things. General William Booth, founder of The Salvation Army, said: “We must wake ourselves up! Or someone else will take our place, and bear our cross, and thereby rob us of our crown.” How appropriate in today’s challenging times, but he said that more than 100 years ago.

We are now into the 19th month of this recession, which makes this the longest recession in 60 years. As a result of the tough economic climate, many organizations are drastically cutting back their fundraising programs. And it is easy to see why:

Total giving decreased in 2008 by 5.7 percent in inflation adjusted dollars … only the second decrease in the past 50 years.

GDP will drop in 2009 … and giving has closely mirrored GDP since 1967.

Target Analytics just released their 2009 first quarter results and every key metric declined … especially the most important one which is the acquisition of new donors.

The government continues to increase spending, proposes to raise taxes … and at the same time, plans to reduce charitable deductions. In countries that have higher taxes and more government social programs, giving is less than half that of the U.S.

But when others scale back on their fundraising efforts, it presents an opportunity to cut through the clutter for those that stay the course. Many years ago, I heard a story of an organization that wanted to mail a membership/fundraising appeal to every address in the state of Florida. They secured the motor vehicle registration list and mailed approximately 7 million pieces.

After the campaign they did an analysis to refine the models they were using on compiled lists and also studied results by various other response lists.

The analysis was done and when completed revealed some valuable information. The most startling fact was that the best responding list was the DMA preference file. While this organization didn’t mail the DMA Mail Preference File they also chose not to purge it from their mailing. What the analysis showed is that people who are not receiving much mail respond at a much better rate than those who are being inundated with mail.

So, here is the opportunity some organization see. As others cut back their efforts and as a result reduce the mailbox “clutter,” there will be an opportunity to have your message heard. Further evidence of not drastically cutting back in hard times came after the 9/11 terrorist attack and after the financial crisis last fall. While it may not be true for all, most organizations that proceeded with the plans where glad they did, and those that didn’t, regretted their decision to cut back.

What else can be done during hard times to maintain and position your organization for future success? Here are four strategies.

First, embraceintegrated marketing.Donors, media and competition are changing and direct mail is declining. There have been plenty of articles and blog posts about the value of integrated marketing. Unfortunately many organizations have not adopted this proven strategy. This is no longer an innovative approach but is now a best practice. In a recent study one human services organization revamped their marketing efforts based on a competitive brand analysis, rolled out a completely integrated campaign and saw an amazing improvement in results:

Number of new direct mail acquired donors up 35 percent

Average gift size up 15 percent

Number of retained/reactivated donors up for the first time in 7 years

Call center revenue up 7.6 percent

White mail revenue up 15 percent

Total NET income up 12 percent

In the just released Giving USA report, giving to human services dropped 12.7 percent and this human services organization was UP 12 percent. That is the power of integrated marketing.

Second, focus on donor retention.With declining trends in retention rates, it is imperative to hold on to your most loyal donors. Do you treat your donors like an ATM machine or do you have specific donor retention strategies that affirm donors and build stronger relationships? A 10 percent increase in retention translates into a 200 percent increase in the lifetime value of a donor. It is disappointing to see how many large organizations still do not have effective acknowledgement programs or high touch strategies for their major donors. If donors start cutting back on the number of charities they are supporting, you must make sure your organization stays top of mind.

Third, increase monthly giving.Revenue per donor is another trend that continues to decline. Do you have an intentional management strategy to convert multi-year donors into monthly EFT and credit card donors? The lifetime value of a typical donor is $200 vs. almost $1,500 for a monthly donor. And this doesn’t include the opportunity that these donors represent for major and planned gifts.

Fourth, ramp up or start a planned giving program. While the transfer of wealth won’t be as big as first predicted, it will still create a huge opportunity for charitable organizations. Your donors are perfect candidates and many might even find legacy giving more meaningful as a result of the market’s poor performance.

Americans are generous and will continue to support charitable organizations. Your constituents need you and your donors love you. But to thrive in these difficult times will require you to challenge the status quo.